Crypto, tech, gas, markets. These four words have been thrust into our daily content diet over the past couple of months and will most likely stay for the foreseeable future. 12 months? 24? It’s hard to tell.

In the venture world, Sequoia conveyed thoughts that many firms are also communicating to their portfolios. Preserve cash. Extend runway. Get to your promised valuation (which is probably inflated).

Within all the chaos, one group hasn’t gotten much attention: the beloved creators. Six months ago, you couldn’t say ‘venture’ or ‘tech’ without also including ‘creators,’ so let’s not forget about them now.

Back in 2008 – 2012 (the last major recession), the creator economy hadn’t quite reached maturity yet, so all it has ever seen is green. Now, this new category player is going through its first economic cycle.

How can a small business built around an individual’s IP push through turbulent times? Here’s a breakdown of what we think is to come:

1. Creators can expect less revenue from institutions. Particularly lower ad revenue payouts and brand deals.

• 77% of Creators depend on brand deals as their primary source of income. That’s 3x as many as every other revenue source combined*
• With brands tightening their purses around marketing dollars, this leads to a high supply (creators) and low demand (brands) environment.
• The one silver lining may be higher accessibility to the shrinking pool of ad revenue, with announcements made by the likes of TikTok and Twitch recently. TikTok is launching a new program that allows eligible creators to take 50% of ad revenues – their first feature paying creators ad revenue directly from the company. Twitch just announced they’ll be opening up the doors on their Ad Program and redefining their payout program from a historically fixed CPM to a 55% rev share – a change that is estimated to represent a 50-150% pay increase for a vast majority of the creators on the streaming platform*.

Prediction: Creators will need to double down on building stronger case studies and start actively pitching to a pipeline of brands that are more cautious with their dollars. The creators that can pitch a strong story around ROI and adapt a collaborative approach to drive the bottom line will come out on top. Brands will expect more bang for their buck. We predict there will be an influx of tools that will help creators ‘professionalize’ in this manner.

2. Creators can expect less income from casual audiences (gifting, tipping, etc.). In any recession-like environment, consumers will clench their wallets tighter.

• We’re already starting to see this happen. Since January, consumers have been consistently allocating less and less of their total monthly budget towards discretionary income. Middle-income consumers are especially cutting back, intending to spend only 27% of their income on discretionary items compared to 37% last year*.
• Entertainment – which broadly encompasses all types of content consumption – will be one of the first to get hit the hardest: 33% of consumers expect this to be a top category they cut back in, only behind dining out.
• With this, it’ll be increasingly important to differentiate between followers who come for passive entertainment and those who find meaningful value as a superfan. These superfans won’t view their spend as something so easy to cut.
• In reality, most followers play the role of audience members and are ultimately more loyal to the content and less to creators as a brand. Any capital investment that solely focuses on bringing more views will lead to less return.

Prediction:

1. In a sea where many provide entertainment, we’re going to see a lot more creator collaborations and unique value-adds to the overall experience. Pure entertainment plays to attract mass eyeballs will be less useful; creators will need to focus on ways to engage deeper, leading to stickier fan loyalty, even if it narrows the viewer base.
2. Creators that focus on value generation, for example, lending their expertise via knowledge sharing or course creation, will have a head start. Specifically, fans will be looking for practical skills and techniques to help them survive a tougher economy and come out stronger. Creators like Lewis Menelaws and John Liang are great examples of content with rich tips for skillsets that could build more demand during a recession. Dr. Julie Smith is normalizing talking about mental health and providing the wellness tips many seek out during challenging times.

3. Creators can expect to streamline their tech stack.

With more cautious capital from VCs, we’ll naturally see fewer upstarts in the space, which ultimately means less net-new innovation. This isn’t to say new solutions won’t continue to pop up – as we all know, challenging times can be Petri dishes for innovation. But in a space still early in its development, we anticipate the number of new tools to be significantly less than what we’ve seen in the past few quarters.

Naturally, there will be solutions that fade away. In the early innings of the creator economy, most new companies threw money around trying to acquire creators and consumers at all costs. This may have worked if we continued in the bubble of 2021, but today’s environment doesn’t quite reward the “growth at all costs” mindset. Not all will be able to survive the downturn, especially if your product positioning and experience don’t have strong moats.

Prediction:

Ultimately, we expect a consolidation of solutions for creators to use. From a user experience perspective, this may not be a bad thing, but it also means a higher number of creators will flock to the same platforms, increasing competition.

1. Creators should move fast to double down on existing platforms that work for them. Almost every creator goes back to these two needs: How do I make money, and how do I make my operation more efficient (content, audience mgmt, etc)? They should determine which partners can continue to provide these core needs and shed off excess partners only in it to leverage their name/time.
2. Creators should also focus on solidifying their relationships with their user base and the platforms themselves, ultimately commanding more ownership over their audience, content, and monetization. Existing platforms focusing on solving creator’s core problems like streamlining content creation, marketing automation/distribution, and superfan conversion will come out on top.

So what does this all mean?

We may be wrong about some of the above, but our predictions point towards the same thing: creators will be rewarded on deep follower value over follower growth. The idea of an ‘owned community model’ has been talked about for some time but has never been more important than it is today.

Getting here means understanding your core value drivers:

1. Who do you create value for?
2. How do you create value for them?
3. Where do you create value?

Food creator Joshua Weissman is a great example of a creator that gets it. At 26 yrs old, he’s amassed 6.5M followers on TikTok, 1.3M on Instagram, and 6.6M on YouTube through years of quality content and value creation for his following. One of the best ways to build a following is to focus on ‘use-case’ oriented content. Josh has a brilliant ongoing series where he recreates popular food dishes… but Faster, Better, Cheaper (click the link and check some out). When it comes to food, aren’t we all just looking for one of those three? It’s a clear reflection that he is a domain expert and understands exactly what his followers want.

However, the point here is he’s passed the three core value drivers with flying colors. His content is pure value, his personality is addicting to watch, and he’s all about community interaction. In fact, he’s transitioned his superfans off social media platforms and onto owned communities like his email list and Discord server – places he has more control and can provide superfans exactly what they’re looking for. His growing Discord server boasts over 53,259 members, with an average daily active user base of 15,000+ fans. The fans help each other by answering questions around recipe challenges, making memes about Josh and printing them onto shower curtains, and collaborating in a channel specifically dedicated to food recipe ideas for his next videos.

It is the epitome of community: a compounding web of value creation. The best part is, Josh has one primary product, his cookbook. No mediocre line of clothing, no digital course, no tip jar. Has he tried other things? Sure. But his unwavering focus and simplicity allow his fans a clear path to supporting him – and wanting more.

Josh isn’t going anywhere, and neither is the 50M+ growing population of digital creators. This bump in the economy is a pivotal one that will create healthy adversity for creators to overcome. These next few years will produce a more resilient type of creator that will drive disruption and ingenuity in building owned communities that give them more content freedom, audience ownership, and transparency on income.

This article was reposted with permission from Saaya Nath and Jack Chen, the creators and writers of Creator Economy-ing. This newsletter provides deep commentary about the Creator Economy, but specifically the Creators.

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The opinions expressed by Saaya Nath and Jack Chen are their own and not reflective of Jump Capital or SWIDIA.